The Netflix and Relativity deal

The Netflix and Relativity deal

The announcement this morning that Relativity Media would release premium content onto Netflix Watch Instantly, as if it were a pay TV channel, could be a game-changer. Frankly, it’s too soon to tell. If Relativity does embrace Netflix as it would HBO or Showtime, in terms of using the platform to release its post-theatrical films, then you’re going to see much stickier competition emerge from what is already a somewhat tenuous dynamic between the streaming service and the cable networks. It’s very difficult to release content on Netflix Watch Instantly at the same time as cable. Many cable networks see it as cannabilization, and prevent such deals from taking place. (Starz is the one pay TV company to actually use Netflix as a cross-platform branding opportunity.)

What the Relativity announcement specifies, is that these films will be made available on Netflix during the “pay TV window,” so it will not create a new paradigm in the home video market. It will, however, bolster the relatively limited selection of new release content on Netflix’s streaming application. Giving way to the older models, much of the Relativity slate will be off-limits for this deal. There’s a big difference between the films other companies control, but that Relativity produced (Get Him To The Greek, Robin Hood), and the films that Relativity controls (Catfish). Like the Starz relationship, it may become an “80/20 rule,” with regards to how much content makes people jump. One exciting title mentioned in the announcement, is David O’ Russell’s The Fighter, starring Mark Wahlberg and Christian Bale. Again, it’s exciting if Relativity (and that film’s theatrical distributor, Paramount) don’t get cold feet with such a brave new tactic. Meanwhile, will Netflix make more moves that suggest it’s a 21st century version of the pay cable company? I honestly don’t know, but since the company has made its name by being unpredictable, I wouldn’t know. Here is an excerpt from the press release:

“Our continued goal is to expand the breadth and timeliness of films and TV shows available to stream on Netflix,” said Ted Sarandos, chief content officer for Netflix. “Historically, the rights to distribute these films are pre-sold to pay TV for as long as nine years after their theatrical release. Through our partnership with Relativity, these films will start to become available to our members just months after their DVD release.”

Added Mr. Sarandos: “Relativity has produced and financed some of the biggest and best films released in the last few years. We are thrilled to partner with them on their exciting upcoming slate of films and to be part of each other’s ongoing success.”

“We have always been about finding new ways to grow and monetize our business,” said Ryan Kavanaugh, Relativity’s CEO. “This clearly is a natural step in the evolution of the movie business and opens up a whole new world of revenue and marketing opportunities. Netflix has certainly made its mark, with a service that reaches over 13 million people and allows consumers to have what they want, when they want it. We have a shared vision, and this deal marks a significant change in our industry.”

“Consumer demand and interest in new platforms are evolving nearly as quickly as the technology,” said Michael J. Joe, Relativity’s president. “The growing number of Netflix subscribers streaming first run movies is very exciting and presents another viable option for us to maximize the long-term business behind our properties. We’re delighted to partner with them on this incredible new opportunity, which has great promise for our industry-reshaping Pay TV deals going forward.”